Credit Suisse First Boston announced yesterday the creation of a new alternative-investment division, to be headed by superstar leveraged finance star Bennett Goodman.

Goodman, who had planned to leave CSFB to pursue opportunities in principal investing, will now run the firm’s Alternative Capital division, which will combine its private equity, hedge fund and other alternative assets.

He will also spearhead the launch of a new investment vehicle focused on leveraged finance assets, with initial commitments approaching $1 billion, according to an internal memo to CSFB employees.

Goodman’s change of heart comes about six months after CSFB announced the 46-year-old veteran dealmaker would relinquish his role as chairman of merchant banking and leveraged finance to explore launching his own money-management business.

“In pursuing my ‘next act,’ I realized I was looking for an opportunity that would give me access to four things – capital, proprietary deal flow, a deep knowledge base and partners I trusted and respected,” Goodman explained. “When I looked at these criteria, I felt I had a better platform to pursue these ambitions at CSFB.”

Retaining Goodman, an originator of the top-ranked high yield bond franchise on Wall Street, is a major coup for CEO John Mack as he strives to raise the firm’s standing in other areas, including mergers advisory and stock underwriting.

The creation of the alternative asset division represents the first big strategic effort by Mack to increase the firm’s revenue-generating capacity and to achieve his stated goal to double profits by 2006.

“This initiative offers CSFB significant growth opportunities, both by increasing our exposure to the fast-growing alternative investment segment and offering attractive synergies with our other core businesses,” said Mack in a statement.

Added Finn, a key architect of the new division: “Each of these businesses – private equity, hedge funds and fund-raising for private equity firms – has great scale and [is] well run, but there hasn’t been a way to capture all the synergies among them. There is valuable knowledge and expertise within each of these areas, but no structure and process to facilitate information sharing.”

Combined with Credit Suisse Asset Management’s platform, which already boasts more than $300 billion in assets under management, the new division will increase the growth potential across all the firm’s asset management businesses.

“Our goal in the next five years is to generate $1 billion in annual revenues and have $50 billion in assets under management,” said Goodman.